Good first quarter for Belmoral; new open pit project is planned

Everything seems to be coming up roses for Belmoral Mines. The Toronto-based resource company, which turned an annual profit for the first time in 1986, reports a first- quarter net income this year of $1 million (4 cents per share) on revenue of $8 million.

The profitable first quarter compares with a loss of $77,000, on revenue of $5.9 million, for the same period last year. The company has restated that 1986 quarterly loss to reflect the reduction in amortization resulting from increased ore reserves recorded in the fourth quarter of last year.

Belmoral produced 13,889 oz of gold during the first quarter of this year and milled 103,872 tons of ore at its Val d’Or operations grading 0.148 oz per ton. The company expects to mine 440,000 tons of ore from all of its operations this year and produce 72,000 oz gold.

At the company’s recent annual meeting, shareholders approved a deal between Belmoral and McCarthy Securities whereby McCarthy acquired 5,250,000 common shares and 2,625,000 warrants for $24.9 million. The warrants may be exercised at $6.875 per share until May 1, 1989. McCarthy intends to sell the common shares and warrants to institutions and private investors in Canada and Europe. Agreement with bank

Earlier in the year, the company entered into an agreement with the Continental Illinois Bank (Canada) giving Belmoral the exclusive right to locate a purchaser for the common and preferred shares of the company held by the bank, at a price per share of $3 and $2.69 respectively.

As part of the agreement, the company directed the bank to sell 1,604,314 common shares and 5,861,133 first preferred shares to McCarthy for an aggregate value of $20,579,390. The balance of 3,645,686 common shares and 2,625,000 warrants was sold to McCarthy by the company for $20,130,083. From the proceeds, Belmoral redeemed the preferred shares for $15,766,448 plus the accrued premium of 9% per annum to the end of April of this year, amounting to $1,928,258.

By issuing 3,645,686 common shares to retire preferred shares convertible to 5,861,133 common shares, the company reduced the diluted capital by 2,215,447 common shares. Belmoral also increased its cash reserves by $2,435,636. The warrants, when exercised, will provide an additional $18,046,875.

The above transactions complete the repayment of the company’s debt of more than $41 million to the bank.

In other news, Belmoral has filed a registration statement with the U.S. Securities and Exchange Commission as the first step in re-establishing a list ng on NASDQ, the American over-the-counter stock trading system.

President Malcolm Slack told the annual meeting a European trip is planned this spring to help sell the company world-wide. Open pit operation

Belmoral and Broulan Resources of Toronto have entered into an agreement in principle whereby the companies will develop and mine a small open pit gold operation on Broulan’s Whitney property in Timmins. Pit preparation is under way.

Under the agreement with Broulan, Belmoral will incur the cost of developing and mining the project and after first recovering costs, the companies will share profits equally.

Belmoral estimates the open pit will yield a minimum of 60,000 tons of ore grading 0.15 oz. The ore will be processed at Belmoral’s mill in Val d’Or, Que., with the first shipment to be made before the end of this month.

The company also reports that it and Broulan are participating in a major $14.4 million underground exploration program on the main Reef mine site approximately two miles west of the Whitney pit. Dewatering at the Reef site is under way and the shaft there is to be re-timbered. Underground drilling

At the company’s Vedron project in the Timmins area, underground drilling has confirmed earlier surface drilling results. The company reports the structure has a strike length still open at 1,330 ft with true widths of 6-to-27 ft and a main zone grade in excess of 0.3 oz. In addition, parallel zones of ore grade material are indicated.

The ramp at Vedron has reached the 275-ft level, which is the first sub-level elevation; this level is being driven on the main zone. A surface drill program is under way.

At the company’s Wrightbar project near Val d’Or, a production decision has been deferred until underground exploration of the higher grade west zone has been completed (by August).

The company’s production cost per oz of gold last year was $375 and a similar cost is expected for 1987. Belmoral’s mill at Val d’Or has been operating at full capacity since the beginning of the last quarter of 1986, the company reports.